I’m going to come straight out and say it, though, I wouldn’t touch the eateries giant with a bargepole right now. The FTSE 250 firm’s strategy to turn around falling customer interest in the likes of Frankie & Benny’s, by rejigging the menu and making its dishes more cost-competitive, continues to fail and like-for-like revenues slipped a further 2% in 2018.

Sales are unlikely to get any better any time soon, either, as fading consumer spending power worsens and an ultra-competitive marketplace persists. Joining the list of mid-tier culinary casualties this week, and underlining the challenging trading environment, were Giraffe and Ed’s Easy Diner as they declared plans to close 27 restaurants between them.

It’s not a shock that City analysts are predicting that The Restaurant Group will endure another profits reversal in 2019, and will consequently be forced to cut the dividend again (the Square Mile is already tipping a payout reduction for 2018 when it announces full-year results on March 15).

Turn your nose up!

There’s plenty that the restaurant chain has to prove beyond its near-term pressures, particularly concerning the steady growth in online shopping that’s affecting footfall in its retail park-based restaurants and threatening to keep profits under pressure in the years ahead. It’s also facing a challenge to prove the doubters wrong over whether it can make its takeover of Asian food franchise Wagamama back in November work.

The task has been made all the more difficult following the bombshell resignation announcement of chief executive Andy McCue last month. He will step aside because of “extenuating personal circumstances” once a successor is found and the timing could hardly be worse for a company in desperate need of stability to help it pull through the current crisis.

For all of these reasons I’m not tempted to invest despite its monster dividend yield and its ultra-low forward P/E ratio of 9.9 times. The Restaurant Group is a share whose market value has shrunk by more than three-quarters over the past three years and I see plenty of reason to expect it to keep reversing.

Gorgeous Georgia

If you’re looking for a big-yielding dividend share to make you rich by retirement then Bank of Georgia Group (LSE: BGEO) would be a much better bet, in my opinion.

Last year the FTSE 250 financial colossus saw pre-tax profit (excluding one-off items) spring 23% higher from 2017 levels, to 492.6m Georgian Lari, with strong growth being reported across both its retail and corporate banking loan books as well as strong growth in assets under administration at its investment banking division.

The Georgian economy is going from strength to strength — last year it grew by an impressive 4.8% year-on-year — and so the City expects Bank of Georgia’s profits to keep growing at a healthy rate in the medium term at least. And this leads to predictions of more bulky dividends, an 89.6p per share forecast payout yielding a giant 5.3%. Throw its low valuation into the equation as well, a prospective P/E multiple of just 5.8 times, and I think the bank is a brilliant income share to load up on today.

The post Retirement saving: could these 5%-yielding dividend stocks turbocharge your retirement fund? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The healthy upsurge which set in during mid-August has lost some steam in recent sessions, but the small-cap has avoided the sell-off that has enveloped many, many more stronger stocks. I find this baffling, particularly as news flow for the business has worsened further in recent days.

First came a fresh slew of worrying releases on the state of consumer spending, latest figures from the Office for National Statistics showing a 0.8% drop in retail sales in September. And this week news emerged that Gourmet Burger Kitchen was planning to shutter around a fifth of its restaurants in the UK. The company joins the likes of Byron, Prezzo, Harry Ramsden’s and Jamie’s Italian in shrinking the size of its estate amid challenging market conditions.

Ignore that 6%-odd yield

The thing is which I find most bizarre is that recent trading details from The Restaurant Group haven’t indicated that the already-embattled company can jump clear of this malaise.

Indeed, despite the huge effort management has made to spruce up its brands and refresh its menus, latest financials released at the end of August showed like-for-like sales drooping 3.7% in the six months to June. And as a consequence adjusted pre-tax profit dropped 21.2% to £20.1m.

At the moment City analysts are forecasting a 10% earnings slide in 2018. And as a result they suggest that the dividend, which has been held at 17.4p per share for the past three years, will finally succumb and drop to 16.8p.

I’d be happy to ignore The Restaurant Group, however, and its 5.9% forward yield due to the strong possibility of an even-bigger dividend cut. The projected dividend is covered just 1.2 times by anticipated earnings, and with net debt levels growing (to £22.8m as of June) the Frankie & Benny’s owner hardly has a strong balance sheet to keep offering such bulky payouts.

At current prices the stock can be picked up on a low forward P/E ratio of 14.2 times. Given the probability of sustained profits turmoil, however, I am steering clear.

A genuine dividend hero

Investors hunting for great dividend shares on the cheap would do much better splashing the cash on Hastings Group (LSE: HSTG) instead.

Right now the car insurance colossus carries a prospective P/E multiple of 8.4 times, and this is far too cheap given the prospect of strong and sustained profits growth beyond 2018 (for which a 2% rise is forecast by City analysts).

Hastings’ share price tanked to levels not seen for almost two-and-a-half years late last week after it advised that “market conditions have remained competitive” and that claims costs are still climbing. That said, the rate at which the FTSE 100 firm is grabbing custom from its rivals suggests to me that profits should keep on rising — its share of the British motor market climbed 30 basis points to 7.5% as of September.

The 14p per share dividend predicted by the number crunchers results in a 7.4% yield. And I believe Hastings has all the tools to keep offering up market-beating payouts long into the future.

The post Ask a Fool: These ultra-cheap dividend stocks yield 6% or more. But could they help you to retire early? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Nice bite

Frankie & Benny’s owner The Restaurant Group (LSE: RTN) is up 2% in early trading despite posting a 3.7% drop in like-for-like sales this morning, which shows just how how far investor expectations have fallen in the dining-out sector.

After a tough three years where the share price has fallen 60%, the market preferred to focus on the news that sales rose 2.4% in the six weeks to 26 August as the group enjoyed “good momentum post the end of the World Cup”. Investors also swallowed the positive management line that it has made “further progress to increase competitiveness of our brands”, while its pubs business outperformed the market.

Feed me

The Restaurant Group is also growing through acquisitions, notably the post-period purchase of Food & Fuel consisting of 11 premium leasehold pubs in affluent London locations for £14.9m.

This is a company in turnaround, though, with adjusted profit before tax for the 26 weeks falling from £25.5m to £20.1m, adjusted EBITDA down from £44.3m to £38.1m and adjusted earnings per share (EPS) dropping from 10p to 7.8p. Operating cash flow fell sharply, from £46m to £25.6m.

Hard to swallow

CEO Andy McCue said extreme weather and the World Cup were challenges for its brands, which also include Garfunkel’s, Coast to Coast, Chiquito and Joe’s Kitchen. However, thanks to the recent pick-up it is on course to hit profits expectations, allowing the board to maintain the interim dividend at 6.8p per share.

It now yields a forecast 6.2% although cover is thin at 1.3. These concerns are reflected in a price of 12.8 times earnings. EPS are forecast to fall 3% in 2018, then grow 5% in 2019. My Foolish colleague Edward Sheldon has little appetite for it, and I would chew this one over very carefully too.

Brown down

Digital fashion retailer N Brown Group (LSE: BWNG) has been an even more brutal disappointment, falling 56% in the last year. Since peaking at around 587p in February 2014 it has withered to just 147p, leaving loyal investors seriously browned off.

The group has been hit by challenging conditions in the retail sector, but net-based shopping has been a rare bright spot, so you would hope that N Brown could get it right here at least. There are signs of progress, with total online revenues up 3% in the last quarter and so-called Powerbrands like Jacamo and JD Williams rising 9%.

Double-digit income

The Manchester-based group is considering closing its final 20 stores, which should slash overheads and sharpen its focus on the web. The £420m enterprise is trading at a dirt cheap valuation of just 6.2 times earnings and despite holding its dividend at 14.23p for the last five years it yields a whopping 10%.

EPS are forecast to fall 1% this year but rise 5% in 2020. This could be a good fit for your income portfolio, if you don’t mind taking a gamble on management finally getting its digital strategy right.

The post Are these 6% and 10% dividend income stocks fantastic bargains or value traps? appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m looking at the three most shorted stocks in the UK, according to shorttracker.co.uk. I’m definitely avoiding this trio for now.

Pets At Home

Pet care business Pets At Home (LSE: PETS) is currently the most shorted stock, with 13.2% short interest. Despite the fact the stock has fallen from over 300p in late 2015, to just 121p today, hedge funds are clearly still quite bearish on the £593m market-cap stock. So what’s wrong with the company?

One key issue with PETS is that over the last year the group has been forced to cut its prices, which has lowered margins and profits. For the year ending 29 March, total gross margin fell to 51.7%, from 54.2% the year before, with underlying basic earnings per share plummeting 11.2% to 13.5p. Looking ahead, analysts expect a further decline in earnings this year.

Trading on a forward P/E of 9 and offering a dividend yield of 6.2%, its shares look cheap, but I’m not willing to bet against the hedge funds right now.

Restaurant Group

The second-most shorted company in the UK, with a 12.4% short interest, is Restaurant Group (LSE: RTN), which owns over 500 restaurants including the brands Frankie & Benny’s, Chiquito and Coast to Coast. Like PETS, the stock has endured an awful run, falling from near 700p at the start of 2016, to just 267p today.

With Brexit uncertainty and the extreme weather we experienced earlier in the year, trading conditions for this hospitality group have been challenging. For example, for the 20 weeks to 20 May, like-for-like sales declined 4.3%, and total sales fell 3.1%. Analysts expect earnings per share to fall by around 5.4% for the full year.

The stock currently trades on a forward P/E of 12.7 and offers a prospective yield of 5.9%, but I’m not tempted by these metrics given the large short interest.

Debenhams

Lastly, with 11.9% short interest, we have Debenhams (LSE: DEB), which I’ve warned investors about before. Over the last five years, Debenhams shares have lost nearly 90% of their value, falling from 107p, to 13.5p today. Yet hedge funds continue to short the stock relentlessly which is not a good sign. Could the department store go the same way as House of Fraser?

Debenhams’ recent performance has been concerning. In June, the group released a profit warning advising investors that pre-tax profit for the year is expected to be between £35m to £40m, a long way short of the £50.3m consensus estimate at the time. Ratings agency Moody’s has recently downgraded the group’s credit rating as a result.

Debenhams shares currently trade on a forward P/E of just 5.3 and offer a prospective yield of 6.6%. However, I’ll be steering well clear.

The post 3 dividend stocks yielding 6% I am definitely avoiding for now appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I would argue that the rate at which auto sales are slumping should have produced an even larger decline, and believe that a sharp shock lower could be just around the corner.

The Society of Motoring Manufacturers and Traders (SMMT) underlined the worrying state of the new car market on Thursday with news of a 3.5% drop in new vehicle sales in June. In the six months to last month, total volumes were down 6.3% from the corresponding period last year, at 1.31m units.

It’s no surprise that Pendragon is struggling in this situation. It endured a 13.3% drop in new vehicle revenues during January-March and gross profit from new cars careered 17.6% lower year-on-year. Therefore, underlying group pre-tax profit more than halved during Q1 to £15.1m, in spite of massive cost-cutting that resulted in savings of £3.9m.

In a spin

City analysts are expecting earnings to edge 3% higher in 2018 before the rate of improvement increases to 14% next year. Pendragon may be expecting sales to pick up during the latter half of the year, thanks to weak comparatives in the corresponding 2017 timespan. I am not convinced though, given the mounting pressure on Britons’ spending power that should keep hammering car sales. Thus, a low forward P/E ratio of 7.2 times has no appeal to me at least.

I am concerned by this, as well as the impact of Pendragon’s swelling debt pile on future dividends. Sure, the car retailer may not be hamstrung by debt, but the rate at which loans have risen should make any income investor sit up and take notice. This jumped £32.4m last year to stand at £124.1m as of December.

The anticipated dividend freeze through to the end of next year, at 1.55p per share, therefore may be considered a tad optimistic. And so investors should put little faith in the company’s bulky 6.4% yield.

Out of date?

The Restaurant Group (LSE: RTN) is another big-yielding share I reckon could fail to meet lofty dividend expectations.

City brokers are expecting the Frankie & Benny’s owner to succumb to sustained earnings woes and cut the dividend in 2018 (an extra 5% profits reverse is forecast for this year). The business has kept the payout level at 17.4p per share for the past three periods, but is expected to reduce it to 16.8p.

On the plus side, the yield stands at a mighty 6%. And glass-half-full investors will also point to Square Mile predictions of a 7% earnings recovery next year, and a subsequent dividend raise to 16.9p (yielding 6.1%) as reasons to be optimistic.

Latest trading details showed like-for-like sales ducked 4.3% during the 20 weeks to May 20, keeping the relentless run of disappointing releases coming. And with the environment becoming tougher amid constrained consumer spending power and intense competition, and cost inflation adding another problem, I believe a bigger dividend reduction could be in the offing.

What’s more, a forward P/E ratio of 13.1 times isn’t that compelling either when you consider that The Restaurant Group’s turnaround strategy is still failing to fire. And the risks  for the company’s retail park-based restaurants are growing as the e-commerce boom continues. There are many other big-yielding shares with better investment potential than this one, in my opinion. Speaking of which…

The post Don’t bank on these 6% dividend yields to deliver a large retirement income appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

British retail performance has been far from convincing of late, but it would have been even worse had it not been for solid figures from the grocery segment. Indeed, the latest retail sales monitor from the British Retail Consortium and KPMG last week underlined the stress facing sellers of non-edible goods, the gauge revealing that like-for-like sales of non-food items fell 1.8% during the three months to March.

Sofa seller struggling

This tough environment was underlined by DFS’s latest financial update in late March in which it revealed that, stripping out the impact of its Sofology acquisition, revenues had dropped 3.5% during the six months to January to £366.5m.

Reflecting the worsening trading landscape, the City is expecting DFS to print a 4% earnings drop in the year to July 2018. And this — combined with its ballooning debt pile as net debt surged to £172.3m as of November January from £135.6m earlier due to the aforementioned M&A activity — is predicted to put paid to the firm’s progressive dividend policy.

Indeed, fiscal 2017’s ordinary dividend of 11.2p per share is expected to remain on hold in the current year. Some investors may still be drawn in by a still-mountainous 5.3% yield, while City predictions of an 11% earnings bounceback next year (and subsequent lifting of the dividend to 11.4p and a consequent 5.4% yield) may tempt more dip buyers to nip in.

I do not think this is advisable, however. Sure, DFS may have kept the interim payout on hold at 3.7p per share last month. But I believe a reduction cannot be ruled out in the full-year payout as the troubles on the high street intensify and particularly as projected dividends are covered just 1.6 times by predicted earnings, some way below the accepted safety benchmark of 2 times.

I would ignore the huge yields and cheap forward P/E ratio of 11.7 times. The company simply carries too much risk right now.

Sales sliding

The murky outlook for the UK retail sector also makes me more than a little concerned over the dividend outlook of The Restaurant Group (LSE: RTN).

The Frankie & Benny’s and Chiquito owner may well have thrown a fortune at revamping its menus. But City analysts do not expect this to propel The Restaurant Group back into profits growth just yet — a 5% earnings reversal is predicted for 2018.

And so the company is finally tipped to reduce the dividend after three years of keeping it at 17.4p per share. A payout of 16p is forecast for this year 

Supported by predictions of a 6% earnings improvement in 2019, glass-half-full investors will point to expectations that dividends are expected to rise again to 16.3p as a reason to be cheerful.

However, the steady sales slide over at The Restaurant Group shows no signs of slowing (like-for-like sales across its chains fell 3% during 2017), and this makes me, for one, highly doubtful of an earnings uplift any time soon.

I would ignore The Restaurant Group’s meaty yields of 5.7% and 5.8% for 2018 and 2019 respectively, as well as its low forward P/E ratio of 13.1 times and steer well clear, as the chances of sustained profit and dividend disappointment are high.

The post Two 5%+ yields I wouldn’t touch with a bargepole appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Frankie and Benny’s owner flipped higher last month after news that like-for-like sales edged down 1.8% during the 20 weeks to May 21. While far from impressive at face value, it led to chatter that the restructuring strategy is beginning to pay off but underlying sales fell by a more painful 3.9% in the 12 months to January.

But investor enthusiasm fizzled out almost immediately as fears over the structural woes facing the business resurfaced. With the bulk of The Restaurant Group’s sites being located in or around Britain’s retail parks, the company is likely to see footfall keep decreasing as tough economic conditions cause shoppers to stay at home. And the rapidly-growing internet shopping phenomenon is pulling even more potential diners away from its doors.

And increasing competition puts the recovery plan in even more  jeopardy.

Dividends diced

The Restaurant Group was forced to scythe the dividend in the year to January 2017 as earnings swung 19% lower, the company paying out 15.84p per share versus 17.4p in the previous year. And with City brokers expecting another 19% decline in the current fiscal period, another dividend reduction, to 15.4p, is currently being bandied around.

While this figure still yields a healthy 4.6%, flimsy dividend coverage of 1.4 times — some way below the widely-regarded safety benchmark of two times or above — makes me more than a tad wary that current payout projections will be met.

I reckon investors should be prepared for a much more painful payout cut than is currently predicted.

Dangerous driller

I also believe risk-averse share pickers should give Wood Group (LSE: WG) a wide berth, despite predictions of meaty near-term dividends.

The oilfield services play is expected to raise 2016’s dividend of 33.3 US cents per share to 33.4 cents in the current period, meaning it sports a market-beating 4% yield.

The number crunchers see no return to earnings growth any time soon however, and Wood Group is expected to follow last year’s 23% earnings drop with an additional 17% fall in the current period. As a consequence, dividend coverage clocks in at just 1.6 times.

Regardless of whether or not Wood Group’s proposed merger with Amec Foster Wheeler is hampered by the Serious Fraud Office probe into Unaoil — Wood has launched an internal review into its own dealings with Unaoil, while Amec has been asked to provide information to the SFO on its history — the murky state of the oil market would discourage me from spending my own investment cash right now.

Brent crude prices have receded to their lowest since November below $45 per barrel this week, and I expect the downtrend to continue as returning US shale producers keep the oil glut in business. In this environment, I would expect demand for Wood Group’s services to remain subdued, and reckon earnings are in danger of stuttering lower well beyond this year.

The post Why I’d dump these 2 dangerous FTSE 250 dividend shares appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.